Spot prices continue to firm in the US domestic flats market

Sources indicate that buying activity in the US domestic flats market is increasingly a reflection of real demand levels, which are continuing to slowly improve. "There appears to be some underlying demand driving current activity" commented one West Coast service center. Few are still filling inventory holes, and while some have chosen to wait out the higher prices until Q2, others maintain that things are "surprisingly stable," and April is shaping up to be a strong month for mills, especially on the West Coast.

April order books on the West Coast-which were only opened about a week ago after a $3.00 cwt. ($66/mt or $60/nt) increase on spot prices-closed Tuesday for one major flat-rolled mill, and others are reportedly filling up quickly as well.
Elsewhere, lead times are all over the place, and while some mills' order books are well into April, other producers in the Midwest and Southern regions are still in mid-March for hot rolled coil (HRC). Production problems that curtailed steelmaking operations in the upper Midwest in late January/early February have been largely fixed, but the halted production is pressuring flat-rolled prices.

Spot prices for cold rolled coil (CRC), the most affected product by the outages, are trending toward the higher end of this week's range, still $45.00-$47.00 cwt. ($992-$1,036/mt or $900-$940/nt) ex-Midwest mill, however some buyers have been quoted as high as $48.00 cwt. ($1,058/mt or $960/nt) ex-Midwest mill. HRC prices are still in the range of $40.00-$42.00 cwt. ($882-$926/mt or $800-$840/nt) ex-Midwest mill, yet most transactions this week have been placed closer to the lower end of the range.

One factor that is likely to contribute to the spot market price trend heading into next month, and remains foremost in buyers' minds, is that capacity utilization rates continue to escalate. The capacity utilization rate last week was 74.8 percent, a 1.1 increase over the previous week and the eighth straight week of increases; last week's utilization rate was also the highest level in 34 weeks when capacity utilization was also at 74.8 percent in week 24 of 2010. And with additional tons being added into the market by the recent opening of ThyssenKrupp's Calvert, Alabama plant on in early December, the slow upticks in end-use demand levels won't be able to sustain current prices too long past April or May.

While market activity has stayed steady in the US, import activity is still slow, and even offers from Mexico are light. Mexican mills have been busy in their domestic markets and are not actively offering flat-rolled products to the US. But that could change over the next few months as expansion operations are ramping up south of the border, which will bring significant additional tonnage into play to buyers in Mexico as well as the US.